Credit card annual fees: How to decide if it’s worth it

The annual fee is how much?

I’m not the only one who asked this when I was new to the credit card world and saw the fee on a premium credit card for the first time. With many of these annual fees topping $500, it’s a fair reaction.

If you’ve actually said this to someone who pays that fee, they were probably quick to tell you how the card makes their life better and why they gladly shell out hundreds of dollars a year for the privilege of using it.

In many cases, we really are able to get far more value from a card than we pay in its annual fee. But as the card landscape changes, we’re seeing many cards get a refresh with a longer list of benefits — and an annual fee hike.

How do you decide whether a card’s annual fee is worth paying? Here’s how we break it down.

Look at your card portfolio

After evaluating the value you’re actually getting from a card, look at your full portfolio. It’s often easy to justify an individual card’s annual fee enough times that you pay substantial fees each year across multiple cards.

Take a look at your cards’ benefits and consider the following.

What benefits am I not using?

It’s easy to get excited about a card and sign up for it only to find that you’re not maximizing what it offers. Take note if there are credits you keep forgetting to use or just no longer need.

Where do I have overlapping benefits?

If you’ve been using credit cards for a while, chances are good that you have some duplicates of the same benefit. Consider whether you have multiple cards that give you the same elite status, a Global Entry or TSA PreCheck credit or lounge access.

What changes has this card undergone since I got it?

While some cards have undergone major changes in the past few years, others have merely lost a benefit or two recently. If you got The Platinum Card® from American Express in part because its entertainment credit covered your Audible subscription or the Chase Sapphire Reserve® for its Priority Pass restaurant access, these cards’ benefit changes may play a role in deciding whether their annual fee is worth paying.

Consider the card’s statement credits

One of the easiest ways to determine whether a card’s fee may be justified is to look at the value of the card’s available statement credits.

For instance, we regularly point out that the American Express® Gold Card‘s $250 annual fee (see rates and fees) is effectively $10 if you can take full advantage of the $240 it offers in statement credits each year. This seems like easy math, but you’ll want to do some additional research before jumping on it.

If you’re like me and already spend a good chunk of your budget on takeout, the Amex Gold’s credits are easy to maximize. I use my up to $10 in monthly Uber Cash when I order Uber Eats and knock out my up to $10 monthly dining credit when I order through Grubhub (enrollment required). But if you don’t order takeout or ride with Uber often, you likely won’t maximize these credits — and that annual fee may not be worth paying.

Related: Who should (and who shouldn’t) get the Amex Gold?

Are the credits for things you’re already spending money on?

If you aren’t already spending money on what your card will give you credits for, the card isn’t saving you any money.

The Amex Platinum, for example, comes with up to $300 Equinox credit each year (subject to auto-renewal; enrollment required). If you’re currently paying for an Equinox membership out of pocket, this will effectively give you $300 back. If you aren’t, you’ll end up spending more for a membership to take advantage of the credit than you would if you didn’t have the card (or the membership) at all.

Are the credits easy to use?

Additionally, not all credits are created equal.

For instance, both the Capital One Venture X Rewards Credit Card and the Chase Sapphire Reserve come with a $300 travel credit. The Sapphire Reserve’s credit is applied automatically for any purchase that codes as travel — as long as you’re spending money on travel with the card, you’ll almost certainly use your credit.

As for the Venture X’s credit, it can only be used for travel booked through Capital One Travel. This means that, at the very least, you’ll have to go through the portal to book your travel. It can also mean you won’t get a full $300 of value from the credit since you may not get the best price in the portal and will likely sacrifice any elite status perks you would get if you booked directly.

Related: Which travel credits are the easiest to redeem?

Calculate the value of the card’s other perks and benefits

While statement credits are the easiest way to determine whether a card’s annual fee is worth paying, they’re far from the only benefit you’ll get with a card. Many cards — especially cobranded ones — come with additional perks that provide value, though the exact value will vary widely depending on the person using them.

For instance, a cobranded airline card that comes with free checked bags can provide hundreds of dollars in value each year to someone who regularly checks a bag. But if you’re team carry-on, this perk may be entirely worthless to you.

Similarly, Priority Pass lounge access can be extremely valuable — but not if you already have access through another card. For example, Priority Pass Select access is one benefit that can help justify the Marriott Bonvoy Brilliant® American Express® Card‘s hefty $650 annual fee (see rates and fees).

However, if you already have access through your Chase Sapphire Reserve, this benefit will not add value if you decide to get the Bonvoy Brilliant. In this case, you would want to ensure the Brilliant’s other benefits would be valuable enough to make its fee worth paying.

Does the benefit actually make your life easier?

A benefit isn’t valuable if you have to work too hard to use it.

For example, you may be excited by the Centurion Lounge access you’ll get with the Amex Platinum, but if you don’t already regularly fly through an airport with a Centurion Lounge, you may find yourself trying to plan your travel specifically to have a layover in an airport where you can take advantage of this access.

If you aren’t careful, you may spend more time and money just to use your card’s benefit. Ensure your card benefits are working for you — not vice versa.

Would you pay for these benefits out of pocket without the card?

This question is an easy way to determine how your card serves you. I could sing the praises of Global Entry and TSA PreCheck all day and am among the many TPG staffers who would gladly pay for this access even if I didn’t get it through a credit card.

However, I do not feel the same about a Clear Plus membership. I’ve never seen a Clear line moving much faster than my TSA PreCheck line, so I don’t feel the need to fork over $189 annually for that occasional time saver. As such, a Clear Plus credit isn’t a card benefit that saves me money.

But someone who does want a Clear Plus membership will easily justify the American Express Green Card‘s $150 annual fee since one of the card benefits is a full credit for this membership.

The information for the American Express Green Card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Related: 7 ways to get free or discounted TSA PreCheck, Global Entry and Clear

Look at the card’s travel and shopping protections

If you have a card with solid travel protections, you know just how valuable it can be when your bag doesn’t reach your destination or you find yourself stranded by a canceled flight. Instead of shelling out for your own hotel room or waiting for an airline to provide compensation, your credit card can provide hundreds of dollars of reimbursement in these sticky situations.

If your baggage is delayed, for instance, you’ll be glad to have the Chase Sapphire Preferred® Card in your wallet. Chase will reimburse you (up to $100 per day, up to five days) for items you need to purchase on your trip, like toiletries and clothes, while you wait for your baggage to arrive. Even if you only use one day’s worth of this benefit, you’ll have more than made up for the Sapphire Preferred’s $95 annual fee.

Similarly, if you make a big purchase only to have it break within a year or two, you know the difference a card’s purchase protection and extended warranty can provide.

While these aren’t always the first benefits we consider when evaluating a credit card’s annual fee, they are worth keeping in mind. Before you cancel or downgrade a card with substantial protections, take a moment to consider what you’ll be left paying if something goes awry and you aren’t protected by your credit card.

Related: Who is covered by credit card travel insurance?

Ask for a retention offer

If you’re considering canceling or downgrading your credit card, ask for a retention offer before deciding. Sometimes, issuers will offer a chance to earn bonus points or miles through spending as an incentive for you to keep the card for another year.

For example, TPG managing editor for credit cards Matt Moffitt balks at the $695 annual fee (see rates and fees) that posts to his Amex Platinum each year. He always asks for a retention offer using the Amex Chat function on his online account.

He is usually offered 10,000 to 20,000 bonus points for spending $3,000 on the card in three months, which are worth $200 to $400, according to TPG’s points valuations. This essentially drops his annual fee to $295 to $495, which is much more palatable.

Related: The ultimate guide to credit card retention offers

Bottom line

At TPG, we believe many credit card annual fees are often worth paying. Still, we know that those fees can add up, and it’s important to consider carefully whether an annual fee is worth paying — both when you’re considering getting a new card and thinking about downgrading one you already have.

To help you decide, take a look at your whole card portfolio and evaluate how much the card’s credits and other benefits add to your life. If it’s not much, you know you can downgrade or skip applying for the card in question. If the card adds significant value, you can feel confident paying its fee each year.

Related: Considering canceling your credit card? Here’s why you might want to ‘downgrade’ it instead

For rates and fees of the Amex Platinum, click here.
For rates and fees of the Amex Gold, click here.
For rates and fees of the Amex Bonvoy Brilliant, click here.